U.S. Home Values Post First Annual Increase In Nearly Five Years

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Zillow Home Value Forecast Shows Two in Five Markets to See Rising Values over Next Year, According to Zillow Real Estate Market Reports

Key facts:

- National home values have reached a bottom. Median home values, as measured by the Zillow® Home Value Index, have risen for four consecutive months.

- U.S. home values rose 0.2 percent from the second quarter of 2011 to the second quarter of 2012. This was the first annual increase in U.S. home values since 2007.

- The Zillow Home Value Forecast shows that 67 of the 156 markets it covers will experience an increase in home values over the next 12 months. Nationally, Zillow forecasts home values will rise 1.1 percent.

SEATTLE, July 24, 2012 /PRNewswire/ -- Home values in the United States have reached a bottom. The Zillow Home Value Index (ZHVI)[1] rose on an annual basis for the first time since 2007, increasing 0.2 percent year-over-year to $149,300, according to Zillow's second quarter Real Estate Market Reports[2]. Values have risen for four consecutive months.

Nearly one-third of metros, or 53 of the 167 covered by the Real Estate Market Reports, posted annual increases in home values. The largest increase came in Phoenix, where home values are up 12.1 percent from the second quarter of 2011 to the second quarter of 2012.

Looking ahead, two in five, or 67 of the 156 markets covered by the Zillow Home Value Forecast[3], are expected to see increases in home values over the next year, with the largest increases expected in the Phoenix metro (9.9 percent) and the Miami metro (6.1 percent). U.S. home values are expected to rise 1.1 percent.

"After four months with rising home values and increasingly positive forecast data, it seems clear that the country has hit a bottom in home values," said Zillow Chief Economist Dr. Stan Humphries. "The housing recovery is holding together despite lower-than-expected job growth, indicating that it has some organic strength of its own.

"Of course, there is still some risk as we look down the foreclosure pipeline and see foreclosure starts picking up. This will translate into more homes on the market by the end of the year, but we think demand will rise to absorb that, particularly in markets where there are acute inventory shortages now. Looking forward, we expect home values to remain relatively flat as the market works through a backlog of foreclosures and high rates of negative equity."

Foreclosures

Foreclosures continued to fall, with 5.8 out of every 10,000 homes lost to foreclosure in June. Foreclosures have been declining since January, when 7.9 out of every 10,000 homes were lost to foreclosure. This number is expected to increase in the future, as foreclosure starts have increased since the completion of the National Foreclosure Settlement.

Foreclosure re-sales also fell, making up 15.6 percent of all sales in June. Foreclosure re-sales have been falling since February, when they made up 18.8 percent of all sales.

Metropolitan Areas

Zillow Home Value Index

Zillow Home Value Forecast

Q2

2012

Quarter-

Over-

Quarter Change

Year-Over-Year

Change

Projected

Bottom in

Home Values

Change in ZHVI,

Q2 2012-

Q2 2013

United States

$149,300

2.1%

0.2%

Q1 2012

1.1%

New York

$336,900

0.8%

-2.7%

Q1 2012

-0.7%

Los Angeles

$383,200

0.2%

-2.7%

Q2 2012

0.5%

Chicago

$158,600

1.7%

-5.8%

Q1 2012

-0.5%

Dallas-Ft. Worth, Texas

$123,900

1.4%

1.4%

Q4 2011

2.4%

Philadelphia

$184,000

-0.6%

-3.5%

Q4 2012

-0.7%

Washington DC

$305,900

1.3%

1.1%

Q4 2011

2.0%

Miami-Fort Lauderdale, Fla.

$148,300

4.7%

6.4%

Q3 2011

6.1%

Atlanta

$107,900

0.0%

-4.9%

--

-1.6%

Boston

$307,600

1.0%

-1.2%

Q4 2011

-0.7%

San Francisco

$465,600

1.9%

-0.4%

Q1 2012

1.9%

Detroit

$74,000

1.2%

2.1%

Q3 2011

-1.3%

Riverside, Calif.

$182,400

2.1%

0.1%

Q4 2011

5.6%

Phoenix

$136,200

6.0%

12.1%

Q3 2011

9.9%

Seattle

$255,400

2.3%

-0.3%

Q1 2012

0.5%

Minneapolis-St. Paul, Minn.

$164,800

0.9%

-2.0%

Q1 2012

0.3%

San Diego

$342,500

1.7%

-0.1%

Q1 2012

1.6%

Tampa, Fla.

$107,500

2.3%

1.7%

Q4 2011

2.3%

St. Louis

$121,600

-1.1%

-4.0%

--

-2.6%

Baltimore

$213,000

0.3%

-2.3%

--

-2.2%

Denver

$211,300

2.3%

3.5%

Q4 2011

1.6%

Pittsburgh

$108,700

0.7%

3.3%

Q2 2009

1.9%

Portland, Ore.

$212,800

2.7%

1.6%

Q1 2012

4.3%

Sacramento, Calif.

$202,900

1.0%

-2.1%

Q1 2012

2.5%

Orlando, Fla.

$118,200

3.4%

1.3%

Q4 2011

2.8%

Cincinnati, Oh

$122,300

2.2%

-0.2%

Q1 2012

0.9%

Cleveland

$108,400

0.6%

-2.3%

Q1 2012

-0.5%

Las Vegas

$114,800

2.5%

-2.0%

Q1 2012

1.4%

San Jose

$566,400

3.7%

3.4%

Q2 2009

3.4%

Columbus

$122,500

-0.2%

-2.0%

--

-1.5%

Charlotte

$131,700

-0.5%

-0.9%

--

-1.2%

The full national report, in its interactive format, will be available at www.zillow.com/local-info on Tuesday, July 24. Additionally, in most areas data is available at the state, metro, county, city, ZIP code and neighborhood level.

COMMENTS

by William Matz| 7/25/2012 2:18:34 PM

I fear this assessment is dangerously optimistic. Foreclosures dropped significantly during the last 18-24 months, as servicers dealt with the fallout from "robosigning" and other misconduct. Now that the 49 state AG settlement was concluded, foreclosures (and hence REO inventory) is ramping up again.

The effect of this slowdown has been to reduce sales at the lower end, were most of the foreclosures are. At the same time modestly improved availability of jumbo pricing has produced a smal increase at the upper end. By themselves those two factors would cause an increase in median prices, EVEN IF PRICES ARE FLAT OR DOWN!

Whenever you hear a discussion of the direction of home prices and it includes "median", run away, as the speakers don't understand. The median price is simply the middle of any given market; it is only of value to real estate professionals, who need to know what is selling. The median house from one month or year to the next is never the same. So to say the median is rising or falling is a misnomer; it is comparing apples to oranges. Prices can fall while the median "rises" or vice versa.

With that understanding, we are likely to see lower median prices in the next several months, as increasing foreclosures create more activity at the lower end of the marker. Thus the middle ("median") will be lower. But that will not tell us whether prices are going up or down. That requires a traditional appraisal or CMA approach that compares comparable homes to determine price direction. That requires much more research and so is rarely available.

Bottom line: median prices are no indicator of market direction in the short term.